This past spring, the California Supreme Court inexplicably tossed out its decades-old “multi-factor” independent contractor test in favor of a far more stringent three-part “ABC” test. (Dynamex Operations West, Inc. v. Superior Court). See, Independent Contractor Status in California Now Falls Under Radically Different Rules (June, 2018).
Under the new test, a worker is automatically presumed to be an employee unless the hiring company can prove each part of the ABC test:
In Garcia v. Border Transportation Group, a California appellate court recently confirmed the ABC test only applies to alleged California Wage Order violations (e.g., minimum wage and overtime issues) and that the traditional “multi-factor” test will continue to apply to all other order claims such as expense reimbursement, wrongful termination, and waiting time penalties.*
The California Chamber of Commerce (Chamber) has spearheaded the “I’m Independent Coalition” to urge state lawmakers to enact more reasonable legislation against the Dynamex ruling. The Chamber also commissioned Beacon Economics, LLC to report on Dynamex’s financial impact in California.
Until the legislature decides to act, businesses who regularly utilize independent contractors should, together with knowledgeable legal counsel, carefully evaluate those working relationships. For example, affirmative answers to any of the following questions might require reclassifying a worker as an employee:
*Note: The Garcia court also held that part C requires an existing, not potential, showing of independent business operation.
November 9, 2018
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